Abercrombie & Fitch Closing 180 More Stores by 2015

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Abercrombie & Fitch Closing 180 More Stores by 2015

By Adam Blair - 02/16/2012
During the past two years Abercrombie & Fitch has shuttered 135 underperforming U.S. stores – 68 alone in Q4 of 2011 – and the closings will continue for at least three more years. The teen apparel retailer announced Wednesday that it will shut an additional 180 domestic stores by 2015.

"The fourth quarter results we announced today were below our expectations," said Abercrombie & Fitch CEO Michael Jeffries during a February 15 conference call. "The difficult macroeconomic environment we saw in the third quarter continued into the fourth quarter and was exacerbated by all-time high cotton costs, unusually warm weather, both in the U.S. and Europe, and a highly aggressive promotional environment."

The retailer currently operates 1,045 retail locations, so while Abercrombie will continue to be a high-profile presence in U.S. retailing, not least because of its promotional technique of positioning buff, minimally dressed models outside key store locations, its executives see the strongest growth prospects internationally and through digital sales channels. "We've established for the total business a goal of $1 billion" in direct-to-consumer (i.e. non-store) sales," said Jeffries. "U.S. stores, obviously a smaller base in better malls, play to the quality level of the A&F business around the world."

Jeffries added that in 2012, the retailer plans to open A&F flagship or Tier 1 stores in Hamburg, Hong Kong, Munich, Amsterdam and Dublin; an Abercrombie kids flagship in London, and approximately 40 international stores under its Hollister brand.

Comp Store Sales Flat in Q4

Even though Abercrombie's $1.3 billion in total net sales for the quarter that ended January 28, 2012 were 16% higher than the same period the previous year, its comp store sales were flat. U.S. sales, including direct-to-consumer sales, were up only 4%, to $962.2 million. In contrast, global direct-to-consumer sales were up an impressive 41%, to $212.3 million, and international sales (including non-U.S. direct-to-consumer) soared 62% to $366.6 million.

Results for the full 2011 fiscal year were slightly better domestically but revealed the same pattern – slow growth in the U.S. compared to international and digital's performance. The company's total net sales increased 20% to $4.2 billion, with comp store sales rising 5%. U.S. sales, including direct-to-consumer, climbed 10% to $3.1 billion, but international sales jumped 63% to $1.05 billion. Total company direct-to-consumer sales increased 36% to $552.6 million.

In pursuit of making digital a $1 billion business, Abercrombie is putting significant resources into its e-commerce IT. "We have some fairly significant IT-related investments in the DTC and DC [distribution center] area including a new order management system that we have going in for DTC this year," said Abercrombie CFO Jonathan Ramsden. In addition, "we have a new planning system we're putting in place over the course of the year, and various other investments in DTC."

Last month, the retailer announced it was using the IBM Smarter Commerce solution, which includes the WebSphere commerce platform for its branded storefronts along with IBM's order management software.

For related content: Store Closings at Abercrombie & Fitch Keep Coming

Abercrombie & Fitch to Close 60 U.S. Stores This Year